Should a Funeral Trust be a Part of Your Estate Plan?

I’m frequently asked if a funeral trust should be part of a client’s estate plan. Having a funeral trust allows a person to pay their funeral expenses in advance and plan the service. The IRS defines a funeral trust as “a ‘pooled income fund’ set up by a funeral home or cemetery to which a person transfers property to cover future funeral and burial costs.” Generally it is a good idea to preplan your funeral expenses, but it is not necessarily to prepay.

Having some of your arrangements preplanned helps your loved ones at a time when, emotionally, they need direction from you. Do you want to be cremated or buried? What funeral home should be used? Is there a family plot or location you want to spread your ashes? Providing direction on these decisions will give your loved ones peace of mind, knowing your wishes are being honored.

The appeal of a funeral trust is locking in today’s prices to protect against inflation. Some nursing homes even require a funeral trust as a condition of admission. Prepaying your funeral can be done directly through a funeral home or through an insurance company. Establishing a funeral trust with a funeral home can pose a problem if you relocate or if the home has financial difficulties. Make sure there is an independent trustee who will audit the funeral bill for reasonableness and return any excess to the family. You should also verify the trust contains language confirming it will be accepted as payment.

Finally, once a funeral trust is in place, you need to keep your information current and make sure your executor and loved ones know there is a trust in place. The funeral home should be kept apprised of any changes to your estate plan pertaining to the executor and how to contact them.

Will Your Money Last Through Retirement?

No one wants to run out of money. But without goals and a solid plan, how can you know for sure whether you’re on the right track?

Will I be able to maintain my current lifestyle?

What will my monthly income be in retirement?

Can I protect my hard-earned savings and still have the income I want?